2007-10-30 08:06:18 CET
2007-10-30 08:06:18 CET
REGULATED INFORMATION
Neste Oil - Quarterly report
NESTE OIL S INTERIM REPORT FOR JANUARY-SEPTEMBER 2007
- Comparable operating profit came in at EUR 159 million in the third
quarter
The third quarter in brief:
- Comparable operating profit of EUR 159 million (Q3/06: 202 million)
- Operating profit of EUR 180 million (Q3/06: 254 million)
- Earnings per share of EUR 0.52 (Q3/06: 0.72)
- Comparable operating profit of Oil Refining EUR 154 million (Q3/06:
183 million), Oil Retail EUR
22 million (Q3/06: 22 million), and Shipping EUR -2 million
(Q3/06: 4 million)
- Softer refining market compared to the third quarter of 2006
- The new diesel line contributed positively to the total refining
margin of USD 10.20 /bbl (Q3/06:
USD 10.80 /bbl)
- The first deliveries of NExBTL Renewable Diesel were supplied
Risto Rinne, President & CEO:"The market was very volatile during the third quarter and
challenging for Oil Refining and Shipping, in particular. Despite
this and the challenge of the start-up of our two new production
lines, our performance was satisfactory.""Although our new diesel line was operational for only part of the
quarter, it already proved its ability to contribute to the total
refining margin according to our expectation. With regard to the
recent valve problems, the valves are now changed and the line is
being started up.""In renewables, we have faced two challenges, namely the new unique
technology and feedstock sustainability. Now the technology is proven
to function and the first deliveries have been supplied to the
customers. We will use various feedstocks, and the work to ensure
their sustainability will continue. This includes complete
traceability of the palm oil whenever it is used, and building
certification systems for sustainable production."
Further information:
Risto Rinne, President & CEO, tel. +358 10 458 4990
Petri Pentti, CFO, tel. +358 10 458 4490
News conference and conference call
A press conference in Finnish on the third-quarter results will be
held today, 30 October 2007, at 11:30 am EET in the Mirror Room at
Hotel Kämp, Pohjoisesplanadi 29, Helsinki. www.nesteoil.com will
feature English versions of the presentation materials.
An international conference call for investors and analysts will be
held today, 30 October 2007, at 3:00 pm Finland / 1:00 pm London /
9:00 am New York. A live webcast of the conference call can be
followed at www.nesteoil.com. The call-in numbers are as follows:
Europe: +44 (0)20 3023 4426, US: +1 866 966 5335. An instant replay
of the call will be available for one week at +44 (0)20 8196 1998 for
Europe and +1 866 583 1035 for the US, using access code 725434.
NESTE OIL INTERIM REPORT 1 JANUARY - 30 SEPTEMBER 2007
Unaudited
Figures in parenthesis refer to the third quarter of 2006, unless
stated otherwise.
KEY FIGURES
EUR million, unless otherwise stated.
Last 12
7-9/07 7-9/06 1-9/07 1-9/06 2006 months
Sales 2,978 3,464 8,642 9,778 12,734 11,598
Operating profit before
depreciation 235 292 797 800 1,007 1,004
Depreciation, amortization
and
impairment charges 55 38 139 113 153 179
Operating profit 180 254 658 687 854 825
Comparable operating
profit * 159 202 542 510 597 629
Profit before income tax 168 246 633 676 841 798
Earnings per share, EUR 0.52 0.72 1.86 1.92 2.46 2.39
Capital expenditure and
investment in shares 59 139 236 384 535 387
Net cash from operating
activities -32 248 321 376 512 457
30 Sep 30 Sep 31 Dec Last 12
2007 2006 2006 months
Total equity 2,331 1,941 2,097 -
Interest-bearing net debt 879 850 722 -
Capital employed 3,265 2,902 2,890 3,265
Return on capital employed
pre-tax (ROCE), % 28.5 34.1 31.9 26.8
Return on average capital
employed after tax
(ROACE), % - - 15.4 15.8
Return on equity (ROE), % 28.7 37.3 34.3 28.9
Equity per share, EUR 9.10 7.54 8.15 -
Cash flow per share, EUR 1.25 1.46 2.00 1.79
Equity-to-assets ratio, % 49.4 43.0 48.4 -
Leverage ratio, % 27.4 30.5 25.6 -
Gearing, % 37.7 43.8 34.4 -
* Comparable operating profit is calculated by excluding inventory
gains/losses, gains/losses from sales of fixed assets, and unrealized
changes in the fair value of oil and freight derivative contracts
from the reported operating profit.
The Group's third-quarter results
Neste Oil's sales totaled EUR 2,978 million in the third quarter
(3,464 million). This decrease of 14% was mainly due to the
divestment of the Group's stake in Eastex Crude Company earlier in
the year. Excluding this, sales were largely unchanged.
The Group's operating profit for the period was EUR 180 million (254
million). Operating profit includes unrealized changes of oil
derivatives valued at EUR -15 million (18 million) and inventory
gains of EUR 36 million (-61 million).
The comparable operating profit for the quarter totaled EUR 159
million, which is some 21% lower than in the corresponding period
last year (202 million). The most significant impact came in the form
of a lower total refining margin, a weaker US dollar, and lower
shipping crude freight rates. In addition, comparable operating
profit was affected by increased fixed costs linked to the Group's
growth projects and a higher level of depreciation. A fine was
imposed by the European Commission on Nynäs Petroleum, a Neste Oil
joint venture, and this had a negative impact of EUR 5 million.
Oil Refining posted a comparable operating profit of EUR 154 million
(183 million), Oil Retail EUR 22 million (22 million), and Shipping
EUR -2 million (4 million).
Profit before taxes was EUR 168 million in the third quarter (246
million), and net profit for the period was EUR 132 million (186
million). Earnings per share was EUR 0.52 (0.72).
The Group's January-September results
The Group's sales in the first nine months of 2007 totaled EUR 8,642
million (1-9/06: 9,778 million).
Operating profit totaled EUR 658 million (1-9/06: 687 million) and
comparable operating profit EUR 542 million (1-9/06: 510 million).
The comparable operating profit was positively impacted by high total
refining margin in the first half of the year.
Oil Refining posted a comparable operating profit of EUR 493 million
(1-9/06: 455 million), Oil Retail EUR 49 million (1-9/06: 49
million), and Shipping EUR 31 million (1-9/06: 31 million) during the
first nine months.
Profit before taxes was EUR 633 million (1-9/06: 676 million) and net
profit for the period EUR 477 million (1-9/06: 496 million). Earnings
per share was EUR 1.86 (1-9/06: 1.92).
Given the capital-intensive nature of its business, Neste Oil uses
return on average capital employed after tax (ROACE) as its primary
financial indicator. At the end of September, the rolling
twelve-month ROACE was 15.8% (2006 financial period: 15.4%).
7-9/07 7-9/06 1-9/07 1-9/06 LTM 2006
COMPARABLE OPERATING PROFIT 159 202 542 510 629 597
- changes in the fair value of
open
oil derivative positions -15 18 -9 8 -26 -9
- inventory gains/losses 36 -61 120 42 134 56
- gains/losses from sales of
fixed assets 0 95 5 127 88 210
OPERATING PROFIT 180 254 658 687 825 854
Capital expenditure
After the completion of two major projects, Neste Oil's capital
expenditure in January-September 2007 totaled EUR 236 million
(1-9/06: 384 million). Oil Refining accounted for EUR 199 million of
investments (1-9/06: 348 million), Oil Retail EUR 27 million (1-9/06:
24 million), and Shipping EUR 2 million (1-9/06: 9 million).
Depreciation in January-September was EUR 139 million (1-9/06: 113
million).
Financing
Interest-bearing net debt amounted to EUR 879 million at the end of
September (31 Dec 2006: 722 million). Net financial expenses between
January and September were EUR 25 million (1-9/06: 11 million).
The average interest rate of borrowings at the end of September was
4.5%, and the average maturity 3.9 years.
Net cash from operating activities between January and September was
EUR 321 million (1-9/06: 376 million). A high level of working
capital had a significant impact on the third-quarter cashflow of EUR
-32 million (248 million).
The equity-to-assets ratio at the end of September was 49.4% (31 Dec
2006: 48.4%), the gearing ratio 37.7% (31 Dec 2006: 34.4%), and the
leverage ratio 27.4% (31 Dec 2006: 25.6%).
Cash and cash equivalents and committed, unutilized credit facilities
amounted to EUR 1,593 million at the end of September (31 Dec 2006:
1,667 million).
Market overview
Gasoline margins weakened dramatically in July, once higher refinery
runs had balanced supply and demand in the US. Towards the end of the
quarter, however, stocks dropped to their lowest level in five years
as gasoline production was cut due to refinery problems and planned
maintenance outages. As a result, gasoline margins increased and were
further supported by growing hurricane fears.
In July, the weak gasoline market pushed refining margins down. The
very strong physical North Sea crude oil market also put pressure on
margins. In August and September, improving distillate margins helped
refining margins recover. The international reference refining margin
in North West Europe, IEA Brent Cracking, averaged USD 4.18 /bbl
(4.42) during the quarter.
Turmoil on the financial markets and investor activity kept crude oil
prices very volatile. After falling in the wake of weakening gasoline
prices, tightening crude oil market fundamentals pushed them up again
in late August, when Brent Dated reached an all-time high of USD
81.10 /bbl. In the third quarter, Brent Dated averaged USD 74.87 /bbl
(69.49). New record prices for crude were seen at a number of points
in October after the reporting period. The price differential between
Urals and Brent Dated narrowed during the third quarter due to
increased demand for heavier crudes. In addition, the Brent Dated
basket has become heavier in 2007. The differential averaged USD
-2.53 /bbl (-4.21) in the third quarter.
Distillate margins widened during the third quarter as inventory
balances tightened on both sides of the Atlantic. The growth in
diesel demand stayed healthy and refinery shutdowns supported diesel
margins, especially in North-west Europe.
The price differential of both low-sulfur and high-sulfur fuel to
crude remained widely negative. Low-sulfur product still suffered
from poor demand, and expectations of a price increase following the
tightening of the North Sea bunker fuel sulfur specification in
August failed to materialize.
The first-generation biodiesel (FAME) industry has continued to
suffer from over-capacity and low profitability. Public discussion on
raw material sustainability has intensified and a lot of work is
being done to build objective sustainability criteria. Demand for
high-quality renewable diesel remains healthy.
Crude freight rates in the North Sea were 28% lower compared to the
third quarter of 2006, and those from Primorsk 24% lower.
Key drivers
7-9/07 7-9/06 1-9/07 1-9/06 Oct 07 2006
IEA Brent cracking margin,
USD/bbl 4.18 4.42 5.26 4.42 2.85 3.73
Neste Oil's total refining
margin, USD/bbl 10.20 10.80 10.63 9.62 n.a. 9.11
Urals-Brent price
differential, USD/bbl -2.53 -4.21 -3.18 -4.44 -2.80 -4.28
Brent dated crude oil,
USD/bbl 74.87 69.49 67.13 66.96 81.42 65.14
Crude freight rates, Aframax
WS points 107 147 131 138 122 145
SEGMENT REVIEWS
Neste Oil's businesses are grouped into four segments: Oil Refining,
Oil Retail, Shipping, and Other. Biodiesel is included in Oil
Refining.
Oil Refining
Oil Refining's third-quarter operating profit stood at EUR 177
million (227 million) and the comparable operating profit at EUR 154
million (183 million). The lower comparable operating profit was
mainly due to lower total refining margin, the weak US dollar
exchange rate, and higher fixed costs and depreciation compared to
the same period last year.
Neste Oil's total refining margin averaged USD 10.20 /bbl (10.80) in
the third quarter, while the benchmark margin (IEA Brent cracking)
averaged USD 4.18 /bbl (4.42).
The total refining margin was affected by low product margins in
July, higher variable costs at the refineries and a narrower price
differential between Brent and Russian crude. On the other hand, the
new diesel line at Porvoo had a positive impact on the total refining
margin.
Oil Refining's comparable return on net assets (annualized) was 25.3%
(27.5%).
Key figures
7-9/07 7-9/06 1-9/07 1-9/06 LTM 2006
Sales, MEUR 2,451 2,973 7,053 8,337 9,484 10,768
Operating profit, MEUR 177 227 603 590 684 671
Comparable operating profit,
MEUR 154 183 493 455 571 533
Capital expenditure, MEUR 46 120 199 348 329 478
Total refining margin,
USD/bbl 10.20 10.80 10.63 9.62 9.85 9.11
Production
Neste Oil refined 4.0 million tons (3.3 million) of crude oil and
other feedstocks at its refineries in the third quarter, of which 3.3
million tons (2.9 million) at Porvoo and 0.7 million tons (0.4
million) at Naantali. Both refineries operated at their full crude
distillation capacity during the quarter. In the third quarter of
2006, the Porvoo refinery also operated at full capacity, whereas
utilization at Naantali was 60.2%, as a result of a planned
maintenance shutdown.
As a result of the start-up of the new diesel line at Porvoo, the
proportion of Russian Export Blend used increased to 62% (42%) of
total refinery input in the third quarter.
Sales
Sales volumes in Finland totaled 2.0 million tons in the third
quarter (2.0 million), and export volumes 1.6 million tons (1.4
million). Thanks to the new diesel production line, diesel sales
increased by 22% and sales of heavy fuel oil decreased by 24%. The
first deliveries of NExBTL Renewable Diesel took place in July.
Sales from in-house production, by product category (1,000 t)
7-9/07 7-9/06 1-9/07 1-9/06 2006
Motor gasoline and components 1,194 1,169 3,630 3,799 4,974
Diesel fuel 1,421 1,163 3,839 3,550 4,821
Jet fuel 189 198 532 524 702
Base oils 74 76 227 231 302
Heating oil 164 129 539 487 684
Heavy fuel oil 180 237 775 812 1,069
NExBTL Renewable Diesel 5 0 5 0 0
Other products 407 421 1,201 1,182 1,543
TOTAL 3,634 3,393 10,748 10,585 14,095
Sales from in-house production, by market area (1,000 t)
7-9/07 7-9/06 1-9/07 1-9/06 2006
Finland 1,987 2,031 5,981 6,034 8,083
Other Nordic countries 635 517 1,575 1,462 1,906
Russia & the Baltic countries 28 16 44 26 53
Other Europe 606 539 1,712 1,712 2,420
USA & Canada 362 284 1,366 1,140 1,417
Other countries 16 6 70 211 216
TOTAL 3,634 3,393 10,748 10,585 14,095
Oil Retail
Oil Retail posted an operating profit of EUR 22 million in the third
quarter (23 million), and a comparable operating profit of EUR 22
million (22 million). The positive impact from increased volumes was
partly offset by higher fixed costs related to expansion of the
station network in the Baltic Rim area.
Figures for 2007 no longer include rental and other income from a
number of service station properties sold in Finland in 2006.
Oil Retail's comparable return on net assets (annualized) was 19.5%
(17.2%).
Key figures
7-9/07 7-9/06 1-9/07 1-9/06 LTM 2006
Sales, MEUR 853 841 2,470 2,470 3,280 3,280
Operating profit, MEUR 22 23 51 53 136 138
Comparable operating profit,
MEUR 22 22 49 49 65 65
Capital expenditure, MEUR 9 11 27 24 47 44
Product sales volume, 1,000
m3 1,087 1,070 3,330 3,248 4,505 4,424
Gasoline sales at Neste Oil's stations in Finland increased by some
4% in the third quarter compared to the same quarter in 2006. Diesel
fuel sales were up by almost 6% due to good demand. Heating oil
sales, however, declined by 3% as a result of lower demand.
A project is under way in Oil Retail designed to strengthen its
profitability and position in Finland.
Sales volumes in the Baltic Rim station network increased by 18%
compared to the same quarter in 2006. Sales of diesel fuel increased
by 28%. The number of outlets in the Baltic Rim totaled 257 at the
end of September.
Oil Retail sales volumes (1,000 m3)
7-9/07 7-9/06 1-9/07 1-9/06 2006
Gasoline 405 379 1,158 1,062 1,452
Diesel fuel 407 391 1,258 1,107 1,510
Heating oil 172 192 546 686 932
Heavy fuel oil 103 108 367 394 530
TOTAL 1,087 1,070 3,330 3,248 4,424
Oil Retail sales volumes by market area (1,000 m3)
FINLAND 7-9/07 7-9/06 1-9/07 1-9/06 2006
Gasoline 182 175 494 501 652
Diesel fuel 264 250 786 748 1,008
Heating oil 172 177 537 598 814
Heavy fuel oil 103 108 367 394 530
TOTAL 721 710 2,184 2,241 3,004
BALTIC RIM * 7-9/07 7-9/06 1-9/07 1-9/06 2006
Gasoline 223 204 665 560 800
Diesel fuel 143 141 472 359 502
Heating oil 0 15 9 88 118
TOTAL 366 360 1,146 1,007 1,420
LPG (1000 t) 51 59 173 188 254
*Volumes from stations and terminals combined
Shipping
Shipping's operating profit for the third quarter came in at EUR -4
million (11 million) and the segment's comparable operating profit
totaled EUR -2 million (4 million). The weaker comparable operating
profit was due to significantly lower freight rates and softer US
dollar exchange rate.
Shipping's comparable return on net assets (annualized) was 13.6%
(13.1%).
Key figures
7-9/07 7-9/06 1-9/07 1-9/06 LTM 2006
Sales, MEUR 82 65 307 220 380 293
Operating profit, MEUR -4 11 35 69 44 78
Comparable operating
profit, MEUR -2 4 31 31 32 32
Capital expenditure, MEUR 1 6 2 9 3 10
Total fleet days 2,871 2,446 8,375 7,071 11,423 10,119
Fleet utilization rate, % 95 93 95 95 94 94
Shipping's total fleet days (the number of days vessels have been
operational, including repair and waiting days) amounted to 2,871 in
the third quarter (2,446). Fleet days for crude fleet totaled 552
(515), and 2,319 (1,931) for the product fleet.
Neste Oil owned or controlled through contracts a total of 31 (28)
tankers as of the end of September. Expansion of the fleet has
focused on larger crude and product tankers. Crude carrying capacity
as of the end of September was 680,407 dwt (660,767), and for
products 606,723 dwt (483,604), totaling 1,287,130 dwt (1,144,371).
The fleet utilization rate for the period remained high, at 95%
(93%).
Shares, share trading, and ownership
A total of 119,808,257 Neste Oil shares were traded in the third
quarter, totaling EUR 3.1 billion. The share price reached EUR 29.80
at its highest and EUR 23.62 at its lowest, and closed the quarter at
EUR 25.67, giving the company a market capitalization of EUR 6.6
billion as of 30 September 2007. A total of 1.8 million shares were
traded daily on average, equivalent to 0.7% of the company's shares.
Neste Oil's share capital registered with the Company Register as of
30 September 2007 totaled EUR 40 million, and the total number of
shares outstanding is 256,403,686. The company does not hold any of
its own shares, and the Board of Directors has no authorization to
buy back company shares or issue convertible bonds, share options, or
new shares.
At the end of September, the Finnish state owned 50.1% of outstanding
shares, foreign institutions 26.9%, Finnish institutions 16.0%, and
Finnish households 7.0%.
Divisional restructuring and changes in segment reporting
Neste Oil announced a new divisional structure and new heads for four
divisions on 27 September. These changes were designed to give the
company better potential to implement its strategy going forward. A
new division, Specialty Products, was formed, and includes the base
oil and gasoline component businesses and is also responsible for
Neste Oil's interests in the joint venture company, Nynäs Petroleum.
The heads of the five divisions are as follows: Jorma Haavisto (Oil
Refining), Jarmo Honkamaa (Biodiesel), Kimmo Rahkamo (Specialty
Products), Sakari Toivola (Oil Retail), and Risto Näsi (Shipping).
Jarmo Honkamaa has been appointed Deputy CEO. These changes came into
effect on 16 October.
Neste Oil will change its segment reporting as of 1 January 2008,
after which the performance of all five divisions will be reported
separately. The figures for Biodiesel and Specialty Products
currently come under Oil Refining segment.
Personnel
The Group employed an average of 4,806 (4,678) employees between
January and September. The number of employees at the end of
September totaled 4,834 (30 September 2006: 4,693).
Health, safety, and the environment
The main indicator for safety performance used by Neste Oil -
cumulative lost workday injury frequency (LWIF, number of cases per
million hours worked) for all work done for the company, combining
the company's own personnel and contractors - stood at 3.1 (3.5) at
the end of September 2007.
Under EU emissions trading, Neste Oil's carbon dioxide allowances for
2007 are expected to equal its carbon dioxide emissions for the year
and it is likely that no allowances will need to be obtained from the
market by the end of 2007.
Neste Oil has been included in the Dow Jones Sustainability World
Index, which features over 300 companies from 24 countries that excel
in their commitment to a more sustainable future. In addition, the
company has participated in the Carbon Disclosure Project (CDP). As a
result, Neste Oil's record on emission disclosure was ranked among
that of the top 10 Nordic companies in the energy-intensive sector.
Update on growth projects
Neste Oil will continue to implement its clean fuel strategy through
a number of projects aimed at building new capacity to produce NExBTL
Renewable Diesel and review alternatives for investing in new
conversion capacity at its existing refineries.
The new diesel production line
The new diesel production line at the Porvoo refinery was operational
for only part of the quarter. The line was stopped in mid-September
for a short maintenance outage, during which a number of faulty
valves were identified. This kept the line down throughout October.
Despite this, the new line has already contributed to higher diesel
sales and lower heavy fuel oil sales and made a positive contribution
to the total refining margin in the third quarter.
The company estimates that the new line will contribute an additional
refining margin of more than USD 2 /bbl on its total output of
approximately 100 million barrels a year over the long term.
NExBTL Renewable Diesel
Neste Oil is aiming to become the world's leading producer of
renewable diesel. The cornerstone of this strategy is the company's
proprietary NExBTL technology, which produces a premium-quality
diesel fuel that outperforms both existing biodiesel and crude
oil-based diesel grades currently on the market.
After the initial start-up in July, the first NExBTL Renewable Diesel
plant at Porvoo was shut down for modifications and repairs in August
and September, and restarted in the beginning of October. The NExBTL
technology is now working on an industrial scale, but various
opportunities for improving the process and catalysts have been
identified. Benefits from these improvements will be taken into
account in the designs of future plants.
A second NExBTL plant is under construction at Porvoo with the same
capacity, 170,000 t/a, as the first unit. Due to some design changes,
the plant is now scheduled to be commissioned in 2009.
Planning work and a lengthy Environmental Impact Assessment (EIA) on
a project for a NExBTL plant jointly owned with OMV in Austria is
continuing. Neste Oil is also planning further expansion of NExBTL
production.
Work to ensure the sustainability of feedstocks used in renewable
diesel production is continuing on an active basis.
The company is also committed to further research and development
aimed at utilizing a wider range of renewable raw materials.
Potential short-term and long-term risks
The oil market continues to prove very volatile. Oil refiners are
exposed to a variety of political and economic trends and events, as
well as natural phenomena, which tend to affect the short-term supply
of and demand for the products that companies produce and sell.
Sudden and unplanned outages at production units or facilities also
represent a risk. Rising investment costs and challenges in
developing new competitive raw materials may impact the company's
growth plans.
The key market drivers for Neste Oil's financial performance are
international refining margins, the price differential between
Russian Export Blend (REB) and Brent crude, and the USD/EUR exchange
rate. Short-term changes in crude oil prices impact Neste Oil's
financial results mainly in the form of inventory gains or losses.
For more detailed information on Neste Oil's risks and risk
management, please refer to the company's Annual Report and Financial
Statements for 2006.
Outlook
Global demand for petroleum products is expected to remain healthy
and the amount of new capacity coming on stream limited in the near
future. As a result, the outlook for refiners with complex capacity
should remain favorable. The market is likely to remain highly
volatile, and the reference refining margin has been under pressure
in October. Recent record-breaking crude prices have further
increased uncertainty on the international oil market.
Low US inventories and refinery maintenance outages seem to keep
gasoline margins higher than normal in the fourth quarter. The diesel
market is supported by stronger seasonal demand.
Neste Oil's new diesel production line is expected to be operational
again in November.
After the ramp-up in October, the NExBTL Renewable Diesel plant is
expected to operate normally for the remainder of the fourth quarter.
Demand for high-quality lubricant base oils remains strong.
Oil Retail's margins are expected to be lower in the final quarter
compared to the rather good period at end of 2006.
Shipping's market is likely to remain very challenging in the next
few years.
Neste Oil's capital expenditure is projected to be approximately EUR
350 million in 2007.
Reporting date for the Financial Statements for 2007
Neste Oil will publish its Financial Statements and fourth-quarter
results on x February 2008 at approximately 9:00 am EET.
Espoo, 29 October 2007
Neste Oil Corporation
Board of Directors
The preceding information contains, or may be deemed to contain,"forward-looking statements". These statements relate to future
events or our future financial performance, including, but not
limited to, strategic plans, potential growth, planned operational
changes, expected capital expenditures, future cash sources and
requirements, liquidity and cost savings that involve known and
unknown risks, uncertainties, and other factors that may cause Neste
Oil Corporation's or its businesses' actual results, levels of
activity, performance or achievements to be materially different from
those expressed or implied by any forward-looking statements. In
some cases, such forward-looking statements can be identified by
terminology such as "may,""will,""could,""would,""should,""expect,""plan,""anticipate,""intend,""believe,""estimate,""predict,""potential,"
or "continue," or the negative of those terms or other comparable
terminology. By their nature, forward-looking statements involve
risks and uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future. Future results
may vary from the results expressed in, or implied by, the
forward-looking statements, possibly to a material degree. All
forward-looking statements made in this report are based on
information presently available to management and Neste Oil
Corporation assumes no obligation to update any forward-looking
statements. Nothing in this report constitutes investment advice and
this report shall not constitute an offer to sell or the solicitation
of an offer to buy any securities or otherwise to engage in any
investment activity.
NESTE OIL GROUP
JANUARY- SEPTEMBER 2007
Unaudited
CONSOLIDATED INCOME STATEMENT
Last
12
MEUR Note 7-9/2007 7-9/2006 1-9/2007 1-9/2006 1-12/2006 months
Sales 2, 4 2978 3464 8642 9778 12734 11598
Other income 4 100 21 147 238 112
Share of 4 17 20 31 27 39 43
profit (loss)
of associates
and
joint
ventures
Materials and -2546 -3098 -7237 -8548 -11183 -9872
services
Employee -60 -52 -187 -168 -224 -243
benefit
costs
Depreciation, 4 -55 -38 -139 -113 -153 -179
amortization
and
impairment
charges
Other -158 -142 -473 -436 -597 -634
expenses
Operating 180 254 658 687 854 825
profit
Financial
income
and expenses
Financial 2 2 6 6 8 8
income
Financial -13 -8 -26 -13 -16 -29
expenses
Exchange rate -1 -2 -5 -4 -5 -6
and
fair value
gains and
losses
Total -12 -8 -25 -11 -13 -27
financial
income and
expenses
Profit before 168 246 633 676 841 798
income
taxes
Income tax -36 -60 -156 -180 -205 -181
expense
Profit for 132 186 477 496 636 617
the period
Attributable
to:
Equity 132 185 475 493 631 613
holders of
the
company
Minority 0 1 2 3 5 4
interest
132 186 477 496 636 617
Earnings per
share
from profit
attributable
to the
equity
holders
of the 0,52 0,72 1,86 1,92 2,46 2,39
Company
basic and
diluted (in
euro per
share)
CONSOLIDATED BALANCE SHEET
30 Sep 30 Sep 31 Dec
MEUR Note 2007 2006 2006
ASSETS
Non-current assets
Intangible assets 5 40 38 38
Property, plant and equipment 5 2396 2218 2310
Investments in associates and joint 173 148 161
ventures
Long-term interest-bearing receivables 2 14 3
Pension assets 83 65 73
Deferred tax assets 5 16 8
Derivative financial instruments 6 22 22 22
Other financial assets 3 2 3
Total non-current assets 2724 2523 2618
Current assets
Inventories 935 739 697
Trade and other receivables 905 936 808
Derivative financial instruments 6 104 158 77
Cash and cash equivalents 55 108 62
Total current assets 1999 1941 1644
Non-currents assets classified as held for 2 0 53 78
sale
Total assets 4723 4517 4340
EQUITY
Capital and reserves attributable to the
equity
holders of the company
Share capital 40 40 40
Other equity 3 2288 1894 2049
Total 2328 1934 2089
Minority interest 3 7 8
Total equity 2331 1941 2097
LIABILITIES
Non-current liabilities
Interest-bearing liabilities 601 663 516
Deferred tax liabilities 278 224 239
Provisions 6 14 12
Pension liabilities 11 12 12
Derivative financial instruments 6 18 24 21
Other non-current liabilities 7 13 4
Total non-current liabilities 921 950 804
Current liabilities
Interest-bearing liabilities 333 298 267
Current tax liabilities 24 63 43
Derivative financial instruments 6 62 123 38
Trade and other payables 1052 1139 1027
Total current liabilities 1471 1623 1375
Liabilities directly associated with 0 3 64
non-current assets classified as held for 2
sale
Total liabilities 2392 2576 2243
Total equity and liabilities 4723 4517 4340
CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
Attributable to equity holders
of the
company
Share Reser- Fair Transla- Retained Minority Total
capital ve value tion earnings
fund and differen-
other ces
reser-
ves
MEUR Note
Total 40 9 -33 8 1581 7 1612
equity at 1
January
2006
Dividend -205 -205
paid
Income and
expense
recognized
directly in
equity
Translation -4 -4
differences
and
other
changes
Cash flow
hedges
recorded in 57 57
equity, net
of
taxes
transferred
to
income
statement,
net of tax -13 -13
Net 1 1
investment
hedges, net
of
taxes
Change in -3 -3
minority
Items 44 -3 0 -3 38
recognized
directly in
equity
Profit for 493 3 496
the
period
Total 44 -3 493 0 534
recognized
income and
expenses
Total 40 9 11 5 1869 7 1941
equity at
30
September
2006
Share Reser- Fair Transla- Retained Minority Total
capital ve value tion earnings
fund and diffe-
other rences
reser-
ves
MEUR Note
Total equity 40 9 26 3 2011 8 2097
at 1
January 2007
Dividend -231 -231
paid
Treasury 3 -12 -12
shares
Income and
expense
recognized
directly in
equity
Translation 1 -2 -1 -2
differences
and
other
changes
Cash flow
hedges
recorded in -18 -18
equity,
net of taxes
transferred
to
income
statement,
net of tax 27 27
Net -2 -2
investment
hedges, net
of
taxes
Share-based 2 2
compensation
Change in -7 -7
minority
Items 1 11 -4 -1 -7 0
recognized
directly in
equity
Profit for 475 2 477
the
period
Total 1 11 -4 474 -5 477
recognized
income and
expenses
Total equity 40 10 37 -1 2242 3 2331
at 30
September
2007
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
MEUR 7-9/2007 7-9/2006 1-9/2007 1-9/2006 1-12/2006
Cash flow from
operating
activities
Profit before taxes 168 246 633 676 841
Adjustments, total 60 -84 121 -34 -85
Change in working -195 104 -254 -166 -106
capital
Cash generated from 33 266 500 476 650
operations
Finance cost, net -17 13 -24 -3 -7
Income taxes paid -48 -31 -155 -97 -131
Net cash from -32 248 321 376 512
operating activities
Capital expenditures -59 -132 -236 -375 -526
Acquisition of shares 0 -7 0 -9 -9
Proceeds from sales 2 14 14 57 77
of fixed
assets
Proceeds from sales 0 79 -5 79 201
of shares
Change in other -17 68 -30 19 20
investments
Cash flow before -106 270 64 147 275
financing
activities
Net change in loans 90 -247 152 91 -74
and other
financing activities
Dividends paid to the 0 0 -231 -205 -205
equity
holders of the
company
Net increase -16 23 -15 33 -4
(+)/decrease (-) in
cash
and marketable
securities
KEY RATIOS
30 Sep 30 Sep 31 Dec Last 12
2007 2006 2006 months
Capital employed, MEUR 3265 2902 2890 3265
Interest-bearing net 879 850 722 -
debt,
MEUR
Capital expenditure and 236 384 535 387
investments in
shares, MEUR
Return on average capital - - 15,4 15,8
employed,
after tax, ROACE %
Return on capital 28,5 34,1 31,9 26,8
employed,
pre-tax,
ROCE %
Return on equity, % 28,7 37,3 34,3 28,9
Equity per share, EUR 9,10 7,54 8,15 -
Cash flow per share, EUR 1,25 1,46 2,00 1,79
Equity-to-assets ratio, % 49,4 43,0 48,4 -
Gearing, % 37,7 43,8 34,4 -
Leverage ratio, % 27,4 30,5 25,6 -
Average number of shares 255994173 256403686 256403686 256097393
Number of shares at the 255903686 256403686 256403686 255903686
end of
the period
Average number of 4806 4678 4678 -
employees
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The interim financial statements have been prepared in accordance
with IAS 34, Interim Financial
Reporting, as adopted by the EU. The interim financial report should
be read in conjunction with
the annual financial statements for the year ended 31 December 2006.
The accounting policies adopted are consistent with those of the
Group's annual financial
statements for the year ended 31 December 2006.
The following interpretations are mandatory for the financial year
ending 31 December 2007, but
not relevant for the Group:
- IFRIC 7 Applying the Restatement Approach under IAS 29 Financial
Reporting in
Hyperinflationary Economies
- IFRIC 8 Scope of IFRS 2
- IFRIC 9 Reassessment of Embedded derivatives
- IFRIC 10 Interim Financial Reporting and Impairment.
2. DISPOSALS
Neste Oil closed the divestment of its 70 % holding in Eastex Crude
Company in mid February
The company has been consolidated as a subsidiary in Neste Oil
consolidated financial
statements until the closing date and included in the Oil Refining
segment. The company had an
insignificant impact on Neste Oil's results, but has contributed
significant revenues, accounting for
EUR 1.8 billion of Neste Oil's total consolidated sales of EUR 12.7
billion in 2006 In 2007, Eastex
Crude Company accounted for EUR 151 million of Neste Oil's sales
(1-9/2006: EUR 1,441
million).
Non-current assets classified as held for sale comprise of the
carrying amount of Eastex Crude
Company at 31 December 2006, and carrying amount of
Best Chain Ltd as at 30 September 2006.
3. TREASURY SHARES
Neste Oil has entered into an agreement with a third party service
provider concerning the
administration of the new share-based long-term incentive
plan for key management personnel. As part of the agreement, the
service provider has
purchased a total of 500,000 Neste Oil shares in February 2007
in order to hedge part of Neste Oil's cash flow risk in relation to
the future payment of the rewards,
which will take place partly in Neste Oil shares and partly
in cash during 2010 and 2013. Despite the legal form of the hedging
arrangement, it has been
accounted for as if the share purchases had been conducted
directly by Neste Oil, as required by IFRS 2, Share based payments
and SIC-12, Consolidation -
Special purpose entities. The consolidated balance sheet
and the consolidated changes in total equity reflect the substance of
the arrangement with a
deduction amounting to EUR 12 million in equity. This
amount represents the consideration paid for the shares by the third
party service provider.
4. SEGMENT INFORMATION
Neste Oil's businesses are grouped into four segments for external
reporting purposes: Oil
Refining, Oil Retail, Shipping and Other. The biodiesel business is
included in Oil Refining, Other
segment includes corporate centre.
SALES
MEUR 7-9/ 7-9/ 1-9/ 1-9/ 1-12/ Last
2007 2006 2007 2006 2006 12 months
Oil Refining 2451 2973 7053 8337 10768 9484
Oil Retail 853 841 2470 2470 3280 3280
Shipping 82 65 307 220 293 380
Other 5 4 14 12 16 18
Eliminations -413 -419 -1202 -1261 -1623 -1564
Total 2978 3464 8642 9778 12734 11598
OPERATING PROFIT
MEUR 7-9/ 7-9/ 1-9/ 1-9/ 1-12/ Last
2007 2006 2007 2006 2006 12 months
Oil Refining 177 227 603 590 671 684
Oil Retail 22 23 51 53 138 136
Shipping -4 11 35 69 78 44
Other -18 -8 -32 -26 -35 -41
Eliminations 3 1 1 1 2 2
Total 180 254 658 687 854 825
COMPARABLE OPERATING PROFIT
MEUR 7-9/ 7-9/ 1-9/ 1-9/ 1-12/ Last
2007 2006 2007 2006 2006 12 months
Oil Refining 154 183 493 455 533 571
Oil Retail 22 22 49 49 65 65
Shipping -2 4 31 31 32 32
Other -18 -8 -32 -26 -35 -41
Eliminations 3 1 1 1 2 2
Total 159 202 542 510 597 629
DEPRECIATION, AMORTIZATION AND WRITE-DOWNS
MEUR 7-9/ 7-9/ 1-9/ 1-9/ 1-12/ Last
2007 2006 2007 2006 2006 12 months
Oil Refining 43 25 106 75 105 136
Oil Retail 7 7 20 21 27 26
Shipping 4 5 11 15 18 14
Other 1 1 2 2 3 3
Total 55 38 139 113 153 179
SHARE OF PROFITS IN ASSOCIATED COMPANIES AND JOINT VENTURES
MEUR 7-9/ 7-9/ 1-9/ 1-9/ 1-12/ Last
2007 2006 2007 2006 2006 12 months
Oil Refining 17 20 31 27 39 43
Oil Retail 0 0 0 0 0 0
Shipping 0 0 0 0 0 0
Other 0 0 0 0 0 0
Total 17 20 31 27 39 43
NET ASSETS
30 Sep 30 Sep 31 Dec
MEUR 2007 2006 2006
Oil Refining 2713 2294 2389
Oil Retail 368 426 336
Shipping 298 308 298
Other 9 5 10
Eliminations 2 -1 -1
Total 3390 3032 3032
RETURN ON NET ASSETS, %
30 Sep 30 Sep 31 Dec Last
2007 2006 2006 12 months
Oil Refining 31,0 35,7 29,9 27,0
Oil Retail 20,3 18,6 37,2 38,5
Shipping 15,4 29,2 25,0 14,4
COMPARABLE RETURN ON NET ASSETS, %
30 Sep 30 Sep 31 Dec Last
2007 2006 2006 12 months
Oil Refining 25,3 27,5 23,8 22,5
Oil Retail 19,5 17,2 17,5 18,4
Shipping 13,6 13,1 10,3 10,5
QUARTERLY SEGMENT INFORMATION
QUARTERLY SALES
MEUR 7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/
2007 2007 2007 2006 2006 2006 2006
Oil Refining 2451 2673 1929 2431 2973 3056 2308
Oil Retail 853 843 774 810 841 817 812
Shipping 82 115 110 73 65 69 86
Other 5 4 5 4 4 5 3
Eliminations -413 -428 -361 -362 -419 -429 -413
Total 2978 3207 2457 2956 3464 3518 2796
QUARTERLY OPERATING PROFIT
MEUR 7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/
2007 2007 2007 2006 2006 2006 2006
Oil Refining 177 288 138 81 227 234 129
Oil Retail 22 18 11 85 23 17 13
Shipping -4 16 23 9 11 38 20
Other -18 -5 -9 -9 -8 -9 -9
Eliminations 3 -3 1 1 1 0 0
Total 180 314 164 167 254 280 153
QUARTERLY COMPARABLE OPERATING PROFIT
MEUR 7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/
2007 2007 2007 2006 2006 2006 2006
Oil Refining 154 205 134 78 183 178 94
Oil Retail 22 16 11 16 22 15 12
Shipping -2 12 21 1 4 5 22
Other -18 -5 -9 -9 -8 -9 -9
Eliminations 3 -3 1 1 1 0 0
Total 159 225 158 87 202 189 119
QUARTERLY DEPRECIATION, AMORTIZATION AND WRITE-DOWNS
MEUR 7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/
2007 2007 2007 2006 2006 2006 2006
Oil Refining 43 35 28 30 25 25 25
Oil Retail 7 7 6 6 7 7 7
Shipping 4 3 4 3 5 4 6
Other 1 0 1 1 1 1 0
Total 55 45 39 40 38 37 38
QUARTERLY SHARE OF PROFITS IN ASSOCIATED COMPANIES
AND JOINT VENTURES
MEUR 7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/
2007 2007 2007 2006 2006 2006 2006
Oil Refining 17 13 1 12 20 11 -4
Oil Retail 0 0 0 0 0 0 0
Shipping 0 0 0 0 0 0 0
Other 0 0 0 0 0 0 0
Total 17 13 1 12 20 11 -4
5. CHANGES IN INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT AND
CAPITAL COMMITMENTS
CHANGES IN INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT
30 Sep 30 Sep 31 Dec
MEUR 2007 2006 2006
Opening balance 2348 2059 2059
Depreciation, amortization and impairment -139 -113 -153
Capital expenditure 236 375 526
Disposals -12 -14 -22
Disposal of a subsidiary 0 0 -39
Classified as assets held for sale 0 -48 -10
Translation differences 3 -3 -13
Closing balance 2436 2256 2348
CAPITAL COMMITMENTS
30 Sep 30 Sep 31 Dec
MEUR 2007 2006 2006
Commitments to purchase property, plant and 76 47 44
equipment
Commitments to purchase intangible assets 1 2 2
Total 77 49 46
6. DERIVATIVE FINANCIAL INSTRUMENTS
30 Sep 2007 30 Sep 2006 31 Dec 2006
Interest rate and Nominal Net Nominal Net Nominal Net
currency value fair value fair value fair
derivative value value value
contracts and
share forward
contracts
MEUR
Interest rate 297 2 304 1 301 2
swaps
Forward foreign 1155 35 1072 7 992 23
exchange
contracts
Currency options
Purchased 334 7 458 -6 290 4
Written 199 2 458 8 274 5
Share forward 17 3 8 1 8 1
contracts
Oil and freight derivative contracts
Volume Net fair Volume Net fair Volume Net
value value fair
value
1 000 bbl Meur 1 000 bbl Meur 1 000 Meur
bbl
Sales contracts 73394 -38 97038 110 79094 29
Purchase contracts 86953 34 116930 -87 106339 -25
Purchased options 2503 0 2185 -5 0 0
Written options 671 0 2160 4 0 0
The fair values of derivative financial instruments subject to public
trading are based on market
prices as of the balance sheet date. The fair values of other
derivative financial instruments are
based on the present value of cash flows resulting from the
contracts, and, in respect of options, on
evaluation models. The amounts also include unsettled closed
positions. Derivative financial
instruments are mainly used to manage the group's currency, interest
rate and
price risk.
7. CONTINGENT LIABILITIES
30 Sep 30 Sep 31 Dec
MEUR 2007 2006 2006
Contingent liabilities
On own behalf
For debt
Pledges 9 8 8
Real estate mortgages 26 27 25
For other commitments
Real estate mortgages 0 1 0
Other contingent liabilities 28 13 28
Total 63 49 61
On behalf of associated companies
Guarantees 3 13 6
Other contingent liabilities 1 4 1
Total 4 17 7
On behalf of others
Guarantees 5 2 6
Other contingent liabilities 0 1 1
Total 5 3 7
Total 72 69 75
30 Sep 30 Sep 31 Dec
MEUR 2007 2006 2006
Operating lease liabilities
Due within a year 116 111 117
Due later than one year and not later than 5 178 176 191
years
Due later than five years 125 144 165
Total 419 431 473
Other contingent liabilities
Neste Oil Corporation has a collective contingent liability with
Fortum Heat and Gas Oy of the
demerged Fortum Oil and Gas Oy's liabilities based on the Finnish
Companies Act's Chapter 17
Paragraph 16.6.
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